Stablecoin, what is it?

13.08.2021

As you may have noticed, Crypto Voucher has added a new product to our offering: the stable coin cryptocurrency USDC. However, questions are raised. What is a Stablecoin, and how does it work? What exactly does the term indicate? What distinguishes it from other cryptocurrencies? Which cryptocurrencies are stablecoin? In this article, we will address all of these concerns.

What Does Stablecoin Actually Mean?

A stablecoin is a new type of cryptocurrency that aims to provide price stability by using a reserve asset as a backer. Stablecoins have gained popularity since they seek to combine the best of both worlds: the quick processing and security or privacy of cryptocurrencies' payments, as well as the volatility-free, stable values of fiat currencies.

While bitcoin remains the most popular cryptocurrency, its values are subject to extreme volatility. For example, it soared from approximately 18,000 USD in November of last year to around 28,000 USD in December. Even though its intraday price movements may be dramatic; it is usual to witness the coin move in exaggerated directions.

Why Should You Buy Stablecoins?

In an ideal world, a cryptocurrency would retain its purchasing value and have the lowest possible inflation, which would encourage people to use their tokens rather than save them.

Stablecoins, on the other hand, take advantage of the benefits of cryptocurrencies — such as transparency, security, immutability, digital wallets, quick transactions, cheap fees, and privacy — without sacrificing the confidence and stability that come with utilizing fiat currency (like the $ or €).

Stablecoins are also showing potential in new applications. They might help a wide range of sectors and individuals that need to make international payments swiftly and securely, from migratory workers who need to send money home to their families to large corporations looking for a more cost-effective and efficient way to pay foreign suppliers.

People in underbanked regions, for example, can use this type of digital money to transact, particularly if they reside in locations where economic instability is a constant issue. This technology enables the use of a global currency that is not subject to local laws and restrictions. Stablecoins also provide significant benefits to the financial services sector as a whole.

Categories of Stablecoins

Stablecoins are categorized into several types, largely based on the assets that sustain them. The reflection on various forms of stablecoins may assist you in determining the foundation for price stability in stablecoins. These are the main stablecoin choices you may come across.

Stablecoins Backed by Commodity

Stablecoins tied to commodities often have hard assets backing them up for stability. Real estate and gold are examples of hard assets. However, gold is the most widely utilized hard asset for stablecoin collateralization, with several stablecoins employing a diverse assortment of precious metals.

Stablecoins Backed by Crypto Assets

While many would argue that stablecoins should not be tied to crypto-assets, crypto-backed stablecoins present a different image. In the full list of stablecoins now accessible, you may discover crypto-backed stablecoins. Stablecoins of this sort are frequently capable of holding an over-collateralized position.

Stablecoins Backed by Fiat Currency

Fiat-backed cryptocurrencies are also among the most widely available stablecoins. They are quite popular, and many of them will be included. in a list of stablecoins in 2021. As the name implies, stablecoins are backed by fiat currencies such as the US dollar, euro, or Chinese yuan, which are retained as collateral.

Stablecoins Backed by Seigniorage

In comparison to a currency or asset, seigniorage is often governed by an algorithm or a procedure. Smart contracts on decentralized platforms can function as independent supporters for the Seigniorage-backed stablecoins in this scenario.

Do you want to purchase stablecoin? Currently, Crypto Voucher provides USDC. With Crypto Voucher, you can buy USDC stablecoin quickly, simply, and safely using a variety of payment methods.